Mortgage rates eased downward a little this week, but they're still firmly north of 7%.
The average rate on a 30-year fixed-rate mortgage slid eight basis points to 7.26% APR in the week ending Oct. 22, according to rates provided to NerdWallet by Zillow. (A basis point is one one-hundredth of a percentage point.) We calculate our weekly average using daily APRs recorded over the past five business days.
Mortgage rates have been above 7% for roughly a month, which is about how long they spent at that level in spring 2024, the last time we saw rates this high. Rates spent significantly longer in 7% territory in fall 2023, and it's starting to look like that's what we may be in for. Major forecasters are uniformly predicting the 30-year will stay at this level into next year.
I could try to give you some kind of but-hey-look-on-the-bright-side cheer. Honestly, though? If there ever was a week to wallow in the state of the U.S. housing market, it might be this one. A slew of new data was released this week, and it truly emphasizes how challenging this market is for every player in it.
Home buyers battle higher rates and high prices
Potential home buyers are being stymied by rising mortgage rates, though to be fair, it isn't just about rates. High home prices and limited inventory are making it harder for buyers, too.
I mentioned a couple of recent instances of mortgage rates above 7%, but mortgage rates were above 7% for basically all of the 1970s, '80s and '90s. Back then, though, lower prices (and higher wages relative to those prices) made it easier to afford a home. Thirty years ago, Freddie Mac's average 30-year mortgage rate came in at 7.86%. But the median price of an existing home in October 1996 was just $121,400, according to data from the National Association of Realtors. (That's roughly $258,000 in today's dollars.)
It’s safe to say that home prices have outpaced inflation in the years since. We don't have October 2026 numbers yet, but in September the median sale price for an existing home was $417,500. So today's prices make mortgage rates in the 7% range hurt that much more.
On Tuesday, the NAR released data on pending home sales in September. Pending means an offer's been accepted and the home is under contract, but the deal hasn't closed, so it's a look-ahead figure. With how long it takes to close on a home, September's pending data is likely a preview of October's sales numbers. Spoiler alert: It's not looking great.
In September, the rate of pending home sales decreased 7.3% month over month and 11.3% year over year. And not just at the national level, either. The NAR divides the country into four quadrants, and each saw the same trend: significant decreases from last month and last year's data. There's usually at least one corner where things look a little better, but not this time.
BEST THAT YOU CAN DO: If you are in a position to buy at today's mortgage interest rates (and home prices), at least there's not much competition. That means you can take your time and negotiate. In many local markets, buyers have more leverage than we've seen in a while. Want the seller to pay for points or a temporary rate buydown? Don't be afraid to negotiate.
Many homeowners are stuck in place
If home prices are so high, you'd think it's still a good time to be a home seller, right? But the thing about selling your home is that it usually means you're now also a home buyer — and today's rates and prices can be tough even if this isn't your first rodeo.
This morning, Realtor.com released an analysis of Federal Housing Finance Agency data on outstanding mortgages (in other words, mortgages held by current homeowners). As of the second quarter of this year, 49.1% of outstanding mortgages have an interest rate that's 4% or lower.
I know, I know, no one's pitying the sad homeowners with extremely affordable mortgages. But think about the math on selling a home in that situation. Not only are you looking at a mortgage rate that's potentially double; you're also facing home prices that are significantly more expensive. (If you bought or refinanced at a time when you could snag a sub-4% rate, that means you probably also bought when home prices were lower.)
Forget trading up. For many would-be sellers, even moving to an equivalent home would significantly raise their housing costs. That potentially leaves a big cohort of homeowners in homes they feel like they can't afford to sell, even if they'd really like to leave.
BEST THAT YOU CAN DO: If this sounds like you, talk to a couple of local real estate agents to get an idea of what price your current home might fetch if you were to sell. If it looks like you'd net enough profit after paying off your current mortgage to take a sizable bite out of your next mortgage, that would allow you to borrow less. A more manageable loan balance could make taking on a pricier home — even at a higher mortgage rate — a little more palatable.
What would it take to fix the housing market?
Lower mortgage interest rates would certainly help get the market moving, but more inventory — particularly, more affordable housing — would be a real game-changer. There's certainly enthusiasm for it; new construction was a huge part of the enormous bipartisan housing bill that became law this past July.
But at the moment, home builders are struggling, too. October data released Monday by the National Association of Home Builders and Wells Fargo found that builder sentiment is at its lowest level in 14 years. To be fair, they have plenty of reasons to be unhappy. Inflation has pushed up material costs, immigration enforcement has exacerbated persistent labor shortages and higher mortgage rates are sidelining potential buyers.
Speaking of rates: Builders have to borrow, too, and rising interest rates push up their costs. So in a moment where new construction would really help, building is slowing down. On Tuesday, the U.S. Census Bureau released September data on building permits (basically, applications for new construction) and housing starts (exactly what it sounds like, construction beginning). Both were down month over month and year over year.
It feels pretty dim, but maybe this is the bright side: It's tough for everyone, so no one's singled out. If you're feeling frustrated trying to buy or sell (or build) a home, it's not you — it's the market.
The article Mortgage Rates Remain Above 7% in a Stalled Housing Market originally appeared on NerdWallet.
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